What is Auto-Renewal of Fixed Deposit: Benefits and Key Considerations

Fixed Deposits (FDs) are a much sought-after investment in India. They are not only preferred by individuals seeking secure and predictable returns on their savings, but also by those who want to diversify their portfolio.

Apart from guaranteed returns that are compounded by interest, another attractive feature offered by many banks, including ICICI Bank, is the option of auto-renewal of FDs. This blog post will explore the concept of auto-renewal of FDs, its benefits, the reasons banks provide this facility and important factors to consider before opting for it.

Apart from guaranteed returns that are compounded by interest, another attractive feature offered by many banks, including ICICI Bank, is the option of auto-renewal of FDs. This blog post will explore the concept of auto-renewal of FDs, its benefits, the reasons banks provide this facility and important factors to consider before opting for it.

What is FD Auto-Renewal?

Auto-renewal is a facility that allows investors to automatically renew their FDs on maturity, for the same tenure as the original deposit and at the prevailing interest rate. Instead of having to visit the bank or provide instructions to renew the FD, investors can enjoy a seamless process where the FD gets reinvested without any intervention.

Benefits of Auto-Renewal

Seamless Process: Auto-renewal eliminates the need for investors to physically visit the bank or go through an online process to renew their FDs. This saves time and effort.

Continued Earnings: With auto-renewal, investors can ensure their funds remain invested, thus continuing to earn interest without any breaks. This ensures the compounding effect, leading to higher returns.

Default Prevention: Sometimes, people might forget to renew their FDs on maturity, leading to the funds being held in a low- or non-interest-bearing account. Auto-renewal helps prevent such instances and ensures that funds are continually invested.

Why Banks Provide Auto Renewal Facility

The auto-renewal facility benefits both banks and customers. Banks can assist existing customers and foster long-term relationships by offering a convenient renewal process. Additionally, it streamlines the administrative process for the bank, making it efficient and cost-effective.

For customers, the facility enhances convenience and offers peace of mind, while encouraging savings and disciplined investing.

Important Considerations Before Opting for Auto-Renewal

When it comes to investing your hard-earned money, caution and consideration are essential. As with any investment, you should consider certain points before opting for an auto-renewal of your FD, as given below:

• Interest Rates: Before opting for auto-renewal, investors should consider prevailing interest rates. While auto-renewal ensures continued earnings, there might be better interest rates available through other investment options.
• Investment Goals: Investors should assess their financial goals and time horizon before opting for auto-renewal. Manual renewal may be more suitable if they have specific plans for the funds upon maturity, such as a major expense or investment opportunity– for example, a part of the maturity amount might be spent on a family vacation and the rest of the amount can then be manually reinvested.
• Liquidity Needs: Auto-renewal ties up the funds for the same tenure as the original deposit. Individuals who require liquidity at a specific time should carefully evaluate whether auto-renewal aligns with their needs.

ICICI Bank FD Renewal Process

Existing ICICI Bank Savings Account customers can open an FD through the iMobile App or Internet Banking. They can also visit the nearest ICICI Bank Branch or call Customer Care for assistance. The Bank offers auto-renewal when opening the FD or any time before maturity.

The closure proceeds of FDs without auto-renewal (i.e., with auto closure) are credited to the linked Savings Account on the maturity date. Please note that an FD with pre-set auto-renewal can be closed through various channels, including Internet Banking, iMobile, visiting a Branch or using an ATM for amounts less than ₹ 50,000.

Difference between auto-renewal and manual renewal of FD

If you are an FD holder, then knowing about the two ways for FD renewal becomes important.

Let’s decode the difference between the two types:

• Auto-renewal of an FD means the bank automatically reinvests the principal and interest for the same tenure at the prevailing interest rate when the FD matures. The holder does not need to take any action.

• On the other hand, manual renewal requires the FD holder to manually instruct the bank to reinvest the amount, with the option to modify the tenure or amount.

Conclusion

Auto-renewal is a valuable feature offered by ICICI Bank and various other financial institutions, that streamlines the FD renewal process for investors. It ensures continuous earnings and convenience. However, every investor should carefully consider their investment goals, liquidity needs and prevailing interest rates before opting for auto-renewal. By understanding the auto-renewal process and considering their financial objectives, investors can make informed decisions and maximise the benefits of FDs.